Asian FX gains on optimism over China reopening, smaller Fed hikes

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Thailand’s baht and South Korea’s won were the top gainers

in Asia on Monday, as emerging currencies got a boost from

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rising hopes of smaller rate hikes from the U.S. Federal Reserve

and the reopening of top trading partner China’s borders.

The baht and Thai stocks rose as much as

1%, both touching their highest levels since April 2022. The

currency has gained 3.4% since the start of 2023, making it the

top performer in the region.

“Given tourist receipts from China in Thailand accounted for

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more than 3% of Thailand’s GDP in 2019, highest in Southeast

Asia, we expect Thailand to be the main beneficiary of China’s

reopening,” analysts at OCBC wrote in a note.

China braced for a “new phase” in its battle against COVID

after Beijing dropped pandemic border controls, dismantling a

final pillar of a zero-COVID policy and allowing a surge in

traffic across the nation.

The yuan jumped to a near five-month high against

the dollar.

Weakness in the U.S. dollar also boosted investor

sentiment after data on Friday showed wage growth slowed in

December, while services industry activity contracted for the

first time in more than 2-1/2 years.

Investors will now focus on the U.S. consumer price index

(CPI) data, due on Thursday.

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“If the CPI numbers come in below expectations again, we can

expect to see a continuation of this risk rally as the markets

will have greater confidence that we are getting closer towards

the end of the Fed tightening cycle,” said Khoon Goh, head of

Asia research at ANZ.

Across the region, currencies strengthened, with the South

Korean won gaining over 2% to hit a peak since early

June.

Both Malaysia’s ringgit and the Philippines’ peso

strengthened by 0.7%.

Major regional stock indexes were also higher. Equities in

Manila and New Delhi rose as much as 1.5% and

1.6%, respectively.

Elsewhere, analysts warned of more volatility in Brazil’s

financial markets following the arrest of supporters of

far-right former President Jair Bolsonaro after they invaded the

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country’s Congress, presidential palace and Supreme Court.

The Brazilian real, among the top-performing emerging

currencies in 2022, had yet to trade on Monday.

“I don’t expect there to be any flowing effect in

emerging Asian currencies from it (the situation in Brazil), but

it does put Asia in a better relative position among emerging

assets,” Goh added.

HIGHLIGHTS

** Alibaba jumped 7% after announcements that Ant

founder Jack Ma is giving up control of the fintech giant

following an overhaul

** Chinese

internet stocks rose

after Guo Shuqing, Communist Party secretary of the

People’s Bank of China, told state media that China’s clampdown

on the internet sector is coming to an end

** Top gainers on Thailand’s SETI include AQ Estate

PCL and ICC International PCL

Asia stock indexes and currencies

at 0652 GMT

COUNTRY FX RIC FX FX INDE STOCKS STOCKS

DAILY % YTD % X DAILY YTD %

%

Japan +0.17 -0.55 <.n2>

China EC>

India +0.42 +0.42 <.ns ei>

Indonesi +0.35 -0.07 <.jk a se>

Malaysia +0.69 +0.66 <.kl se>

Philippi +0.67 +0.96 <.ps nes i>

S.Korea 11>

Singapor +0.23 +0.62 <.st e i>

Taiwan +0.53 +0.57 <.tw ii>

Thailand +0.96 +3.36 <.se ti>

(Reporting by Himanshi Akhand in Bengaluru; Editing by Eileen

Soreng)